> **来源：[研报客](https://pc.yanbaoke.cn)** # CMBI Credit Commentary Summary ## Core Content This document is a credit commentary on Zhongsheng Auto Group (ZHOSHK), focusing on its financial performance, credit risk, and investment outlook. The commentary highlights the market overreaction to a profit warning and reaffirms a "buy" recommendation on its bond ZHOSHK 5.98 01/30/28. It also outlines the company's financial position, operational improvements, and future growth strategies, particularly in the EV sector. ## Main Points ### 1. Market Reaction to Profit Warning - Zhongsheng's FY25 results were weak, but the market overreacted. - The bond ZHOSHK 5.98 01/30/28 dropped by 6.5 points and credit spread widened to 362bps after the profit warning. - The bond has since recovered 2.9 points, currently trading at 96.0, with a YTM of 8.4%. ### 2. Financial Performance and Operating Metrics - New car sales volume increased in FY25 by 2.5% to 497,316 units, with a 17% rise in 2H25. - Gross loss margin for new car sales increased to 2.9% in FY25 from 2.6% in FY24. - Commission income dropped 38.7% to RMB2.6bn due to the termination of "high interest, high rebate" financing. - Impairment losses totaled RMB2.3bn in FY25 from store network realignment and asset disposals. ### 3. Positive Outlook and Strategic Adjustments - Zhongsheng aims to achieve breakeven in new car sales gross profit by FY26. - Traditional OEMs like BMW, Mercedes Benz, and Audi reduced MSRP by 10-25%, which should help lower COGS and improve gross margins. - The company plans to double its EV store count in FY26 and exit 50-150 underperforming stores. ### 4. Liquidity and Net Debt Profile - Zhongsheng has maintained a positive FCF and reduced net debt from RMB17.155bn in FY23 to RMB14.220bn in FY25. - The cash/ST debts ratio is at 1.2x, indicating sufficient liquidity. - The company has repaid its CB due May'25 and early-redeemed ZHOSHK 3 01/13/26, totaling cUSD630mn. ### 5. Future Financial Projections - Expected improvements in key coverage ratios. - Assuming breakeven gross margin for new car sales by 2028 and annual capex of RMB3bn, net debt/EBITDA and EBITDA/int are projected to improve to below 2.5x and above 5x, respectively. ## Key Information ### Bond Details - **Ticker:** ZHOSHK 5.98 01/30/28 - **Size:** USD 600.0mn - **Outstanding (O/S):** USD 600.0mn - **Coupon:** 6.0% - **Maturity:** 1/30/2028 - **Offer Price:** 97.0 - **Z-Spread:** 378bps - **YTM:** 8.4% ### Financial Highlights - **FCF:** RMB5,884mn in FY25 - **Net Debt:** RMB14.220bn in FY25 - **Debt/EBITDA:** 7.6x in FY25 - **Net Debt/EBITDA:** 3.1x in FY25 - **EBITDA/Interest:** 2.8x in FY25 ### Store Network and EV Expansion - EV store count increased from 20 in Dec'24 to 40 in Dec'25. - EV sales accounted for 8.2% of total sales in FY25. - The company plans to expand into EV brands such as Geely and double EV store count in FY26. ## Conclusion Despite the weak FY25 results, the commentary maintains a "buy" stance on ZHOSHK 5.98 01/30/28, citing the company's positive FCF generation, net debt reduction, and strategic focus on EV growth. The market is expected to price in a multi-notch downgrade, but the bond is viewed as offering a favorable risk-return profile based on improved operating performance and liquidity. ## Disclaimer - This report is for informational purposes only and does not constitute investment advice. - The information is based on publicly available data and may not be accurate or complete. - CMBIGM is not liable for any loss or damage resulting from reliance on this information. - The report is subject to change and is intended for specific recipients only.